US Probe Veers Close to Najib Family

Reports in American newspapers that the US government plans to seize more than US$1 billion in assets purchased by funds allegedly stolen from the 1Malaysia Development Bhd. sovereign wealth fund brings a massive scandal one giant step closer to Prime Minister Najib Razak.

According to stories in the New York Times and the Wall Street Journal, the properties, bought through Delaware shell companies, involve real estate in Los Angeles and New York, which according to other sources are believed to be closely tied to the Najib family, particularly Najib’s stepson Riza Aziz, Rosmah’s son by a previous marriage.

The other is Low Taek Jho, or Jho Low as he is known, who was the brains behind setting up 1MDB in the first place. Although Najib himself was the financial adviser to the fund until quite recently and according to statute was responsible for signing off on all of the 1MDB financial transactions, he is not expected to be named. After establishing a flamboyant presence in New York’s café scene, Jho Low has more recently made himself scarce in the US.

The Justice Department action, expected to take place on July 20 in the US, follows a May 24 move by the Monetary Authority of Singapore to force the closure of BSI Bank Ltd – the first merchant bank to be closed in Singapore in 32 years – for its role in what Singapore authorities charged were 41 cases of breaches of money laundering and other Singapore laws. MAS Managing Director Ravi Menon called BSI Bank “the worst case of control lapses and gross misconduct that we have seen in the Singapore financial sector.”

Investigations into 1MDB are said to be underway in seven countries, although the US one is believed to be the most advanced. Swiss authorities have charged that as much as US$4 billion may have been laundered out of the fund into Swiss banks. In all, according to Democratic Action Party spokesman Tony Pua, speaking to local media, the government may be forced to take over more than MYR27 billion (US$6.75 billion) in unfunded liabilities from 1MDB, which was ordered shut down in May with its assets and liabilities to be transferred to the Ministry of Finance.

So far, Najib has been able to shortstop more than a year and a half of allegations by both opposition figures and members of his own government, threatening accusers with sedition charges and firing or otherwise neutralizing government investigators as well. Kevin Morais, a lawyer working on charges against the prime minister for the Malaysian Anti-Corruption Commission, was kidnapped and murdered last September after it became apparent that he was feeding information to Clare Rewcastle Brown, the indefatigable editor of the Sarawak Report, who has done more than anyone else to delineate wrongdoing involving Najib, Rosmah and 1MDB.

Through it all, relying on intimidation of accusers and by alleging to his ethnic constituency that the accusations were a Chinese plot to take power away from ethnic Malays, relying as well on stirring religious extremism, Najib has been able to ride out what is considered the biggest political and financial scandal in Malaysian history, possibly involving at least two murders.

A statewide election in Sarawak in May, plus two by-elections in June that were won by the United Malays National Organization and its Sarawak allies left Najib riding high politically and planning a possible national snap election that would cement his leadership for the next five years under Malaysia’s parliamentary system.

Now, however, given the US action against properties that are closely tied to his family, it is questionable whether he wants to dare such an election, even with a fragmented and ineffective opposition. Lim Guan Eng, the secretary general of the Democratic Action Party, is under investigation by the Malaysian Anti-Corruption Commission for purchasing a home from a friend well below the market price. Anwar Ibrahim, the leader of the three-party Pakatan Harapan opposition coalition, is in prison, serving five years on trumped-up charges of sexual perversion. The Islamist Parti Islam se-Malaysia, the third leg of the coalition, has split into two factions over the issue of implementing Islamic law in the one state the party controls.

The government has also maintained ruthless control over the press, temporarily suspending The Edge financial newspaper group after it printed damning allegations against 1MDB and driving the Malaysian Insider, an influential online publication, out of business. The government has also blocked Sarawak Report and Asia Sentinel from online circulation in Malaysia.

Thus, it is almost certain that Najib can remain in power unless an indictment is brought against him or other members of his family. For instance, he has so far survived an announcement late last year by French authorities that two officials of the defense company Thales had been indicted specifically on charges of bribing Najib over the purchase of French submarines more than a decade ago.

In this case, it appears that the assets the US Justice Department is expected to confiscate are closely tied to the Najibs themselves. According to the New York Times, they include real estate which is believed to have been purchased for the Najib family by Jho Low through shell companies, as well as art and other luxury goods. The US, for instance, may also be after assets connected to Red Granite Productions, partly owned by Rosmah’s son Reza Aziz, which produced the award-winning movie Wolf of Wall Street, directed by Martin Scorsese and starring Leonardo de Caprio.

As the Times pointed out, the forfeiture process is lengthy, with a court required to ascertain that no other interested party has a valid claim to the properties. In turn, that raises the interesting question whether members of the Najib family might dare to step forward to claim them. Once true ownership is determined, the court must decide whether the money used to buy those assets was, in fact, earned illicitly. Only then can the government permanently seize the assets, the Times asserted.